Your first year in business is an exciting, challenging and opportune time to build a solid financial foundation for the future. If you learn and master the basics early, you can set your small business up for success and shorten the startup learning curve.
Here are ten financial lessons every entrepreneur will inevitably learn their first year in business.
1. Develop a plan. Whether you pull together a brief summary or an extensive document, planning is essential to success. Often the due diligence of a smart business plan can preclude future financial headaches (i.e. marketing to the wrong audience, hiring the wrong people with inadequate skill sets, etc.)
2. Create an emergency cash reserve. Using your operational budget as a gauge, create a cash reserve for lean times. It’s not a question of will you need it, but when.
3. Become financially literate. Learn to master your money or it will master you. It’s an important time to closely monitor expenses and gain a working knowledge of your basic small business financial statements.
4. Reinvest your profits. Take a lesson from Warren Buffett and reinvest in your business. You may be tempted to spend your profits. Don’t. Even a small sum can turn into great wealth.
5. Make swift financial decisions. The more you know, the better equipped you are to make sound financial decisions. Learn to act decisively early on. If you’ve developed a plan of action (step 1), every financial decision will be easier to make.